M/S Carpenter Classic
Exim. P. Ltd. Vs. Commr. of Customs (Imports) & ANR.  INSC 293 (12
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 3871 OF 2006 M/s
Carpenter Classic Exim P. Ltd. ..Appellant Versus Commnr. Of Customs (Imports)
and Anr. ..Respondents (With Civil Appeal No. 3872 of 2006)
Dr. ARIJIT PASAYAT,
in these appeals is to the judgment of Customs, Excise and Service Tax
Appellate Tribunal, South Zone, Bangalore (in short the `CESTAT'). The orders
in original passed by the Commissioner of Customs, Bangalore and Commissioner
of Customs, Chennai were affirmed subject to certain modifications.
appeals were filed against the Order-in-Original No.27/2004 dated 27.7.2004 by
Commissioner of Customs, Bangalore and Order-in- Original No.2724/2004 dated
30.9.2004 passed by the Commissioner of Customs, Chennai. The details of the
orders challenged before the CESTAT and the quantum involved are as follows:
Appeal No. Appellant
Differential Redemption Penalty Duty Fine C/428/04 M/s Rs.59,12,619/
Rs.15,00,000/ Rs.55,44,396/ Carpenter - - - Classic Exim (P) Ltd. C/429/04 Ravi
- - Rs.10,00,000/ Karumbaiah, - MD, CCEPL C/433/04 Sanjeev - - Rs.1,00,000/-
Kabubur Appeal No. Appellant Differential Redemption Penalty Duty Fine C/436/04
M/s Rs.36,96,201/ - Rs.9,61,506/- Carpenter - Classic Exim (P) Ltd. C/437/04
Ravi - - Rs.9,00,000/- Karumbaiah, MD CCEPL C/13/05 Thomas - - Rs.5,00,000/-
Mathew C/06/05 Sanjeev - - Rs.7,00,000/- Kabbur
facts as noted by the CESTAT are as follows:
The DRI Officers
received intelligence regarding the under-valuation of imported goods by the
appellants. The business premises and the residential premises of the concerned
persons were searched and incriminating documents were seized. Statements of
S/Shri Ravi Karumbaiah, Managing Director of M/s. Carpenter Classic Exim Pvt.
Ltd., V.S. Chandan, CADD Operator were recorded under Section 108 of the
Customs Act 1962 (in short the Act). The residential premises of Shri Sanjeev
Kabbur, Ex-Marketing Manager of the company were searched and some documents
were seized. Statement of Sanjeev Kabbur was also taken.
Ms. Jagruthy Sevak
was the Executive of the appellant company, her statement was also recorded.
The investigations conducted revealed that Shri R. Karumbaiah, his wife, Shri
Thomas Mathew and his wife as Directors started M/s. Carpenter Classics Exim
Pvt. Limited (in short `CCEPL') as a private limited company in the year 1995.
The company decided to import their requirements of kitchens from Veneta Cucine
of Italy who are reputed manufacturers. Shri Karumbaiah and Thomas Mathew
hatched a conspiracy to undervalue their imports for increasing their profits
in the local market. For this purpose, they had prepared the invoices of the foreign
supplier and sent them to Italy. Thomas Mathew floated a front company in the
name of Proma SRL, the manipulated invoices were raised in the name of the
above front company. These invoices were filed by the appellant before the
Customs officials for assessment. They made their first import in the year 1995
through ICD, Bangalore. The foreign suppliers invoice and packing list had been
signed by Shri Thomas Mathew on behalf of M/s. Proma SRL. CCEPL communicated
their requirements along with the drawing to Proma SRL with a copy to Veneta
Cucine. Sometimes the orders were communicated directly to Veneta Cucine. Proma
SRL prepared the bill showing the actual price in Lira and forwarded the
drawings to Veneta Cucine. Veneta Cucine in turn forwarded the confirmation
order to Proma SRL and CCEPL. These orders of confirmation indicated the actual
price of the products ordered in Liras. Veneta Cucine at the time of loading of
containers and shipment prepared their own packing lists showing the order
numbers of CCEPL and the destination as CCEPL. CCEPL arranged for their
representatives to be present at the time of loading of the containers at the
factory premises of Veneta Cucine to ensure not only proper loading but also to
relabel the packages to make it appear that the shipment had been affected by
Proma SRL. CCEPL presented the invoices prepared in the name of Proma SRL along
with the Bills of Entry which showed substantially lower prices than what was
actually charged by Veneta Cucine.
In order to
camouflage the entire conspiracy of under-valuation CCEPL collected a certain
portion of their sales proceeds from certain customers in cash. The cash so
collected was handed over by Shri R. Karumbaiah to Mr. Thomas Mathew for
settling the account of Veneta Cucine. The portion containing the prices in the
confirmation order has been cut out in almost all such documents ostensibly to
hide the actual price from the customers.
substantially under-valued their import consignments in order to evade payment
of customs duty. Similar modus operandi was adopted to import goods through
Chennai Port also. On the basis of investigation, show cause notices were
issued to the noticees. After observing the principles of natural justice, the
adjudicating authorities at Bangalore and Chennai passed orders which were
assailed before CESTAT.
Various stands were
taken before the CESTAT. The CESTAT noted the fact that the Commissioner has
observed that Ravi Karumbaiah has admitted that Proma SRL was a front company
set up in order to get the documents in the name of the said company and to evade
payment of customs duties. The appellants submitted that from the extract of
the company's house record, it is clear that the Proma SRL is a genuine company
which is in existence. Hence, it is clear that there are discrepancies in the
statement recorded from Ravi Karumbaiah and as such it is clear that the
statement was obtained under duress and coercion. It was submitted that the
oversea suppliers have granted the appellants substantial discount on the
listed price and it was for this reason that the prices mentioned in the
invoices were deleted. It is a normal trade practice not to reveal the price of
the product at which they are procured by the importer/wholesaler to a
customer. This is done basically to prevent the customers from knowing the
margin of profit enjoyed by a wholesaler/importer; otherwise customer will
The CESTAT noted that
the main charge against the appellants is that of under valuation of the
imported goods using a particular modus operandi.
documents were seized from the premises of the appellant. The statements were
recorded under Section 108 of the Act from various persons. DRI investigation
was taken up consequent to investigations made by Income Tax Department. It
appears that Ravi Karumbaiah was the Managing Director and the Chief Promoter
of the company. Shri Sanjeev Kabhur was ex- marketing manager of the company
and Shri Thomas Mathew was the Director of the appellant-company and also a
Director of Proma SRL who issued the invoices relating to the imports.
Allegation was that with the help of Thomas Mathew invoices were issued by
Proma SRL using it as a front. The actual suppliers of the imported equipment
were M/s Veneta Cucine and other foreign companies.
established that value of the imported goods as per Veneta Cucine was different
from those in the invoices of Proma SRL. The difference between the two values
was settled by Thomas Mathew who collected differential sale amount during his
visit to India and later settled the same with Veneta Cucine. This probably was
the modus operandi. The revenue relied upon the following documents:
7 Photocopy of a Fax
dated 214.1997, said to have been sent by Thomas Mathew bearing No.VC/CC/9708
dated 21.4.97 addressed to Anchise Ballestrieri and Vittorio Tollardo of Veneta
Cucine S.PA. Treviso, Italy.
7 Photocopy of a fax
message No.CCEPL/TM/089/97 dated 5.4.97, said to have been sent by Carpenter
Classics to Thomas Mathew.
7 Photocopy of a fax
message dated 8.10.98, said to have been sent to Thomas Mathew by Ravi
7 Photocopy of a
letter No.CCEL/Proma/1362/97-98 dated 10.1.98 to have been sent by Carpenter
Classics to Proma SRL.
7 Photocopy of Bill
of quantity and Order confirmations of M/s. Veneta Cucine pertaining to
shipment called lndia-13 and lndia-14 7 Photocopy of packing list of M/s.
Veneta Cucine pertaining to shipment called lndia-13 and lndia-14.
The CESTAT referred
to the statements given by Shri Ravi Karumbaiah under Section 108 of the Act.
It held that the conclusions were supportable as the evidence on record clearly
established that there was under valuation to the extent of 65% with which Shri
Thomas played crucial role in the nefarious activities. It was held that both
Ravi Karumbaiah and Thomas Mathew were liable to penalty under Section 112(a)
of the Act and the company was also liable to penalty under Section 114A of the
Act. The differential duty was to be paid alongwith interest. The penalty
however was deleted so far as Shri Sanjeev Kabbur is concerned.
primary stand is that even before the show cause notice was issued, to prove
its bona fide, a sum of Rs.25 lakhs was paid. Reference is made by learned
counsel for the appellant to the proviso to Section 114A of the Act. It is
submitted that since reduction in the quantum is permissible, discretion is
given in the matter of imposition of penalty.
counsel for the respondents on the other hand supported the judgment.
112(a) and Section 114A read as follows:
for improper importation of goods, etc. - Any person, - (a) who, in relation to
any goods, does or omits to do any act which act or omission would render such
goods liable to confiscation under section 111, or abets the doing or omission
of such an act, or 114A-" Penalty for short-levy or non-levy of duty in
certain cases. - Where the duty has not been levied or has been short-levied or
the interest has not been charged or paid or has [xxx] been part paid or the
duty or interest has been erroneously refunded by reason of collusion or any
wilful mis- statement or suppression of facts, the person who is liable to pay
the duty or interest, as the case may be, as determined under sub-section (2)
of section 28 shall also be liable to pay a penalty equal to the duty or
interest so determined :
Provided that where
such duty or interest, as the case may be, as determined under sub-section (2)
of section 28, and the interest payable thereon under section 28AB, is paid
within thirty days from the date of the communication of the order of the
proper officer determining such duty, the amount of penalty liable to be paid
by such person under this section shall be twenty-five per cent of the duty or
interest, as the case may be, so determined :
Provided further that
the benefit of reduced penalty under the first proviso shall be available
subject to the condition that the amount of penalty so determined has also been
paid within the period of thirty days referred to in that proviso :
Provided also that
where the duty or interest determined to be payable is reduced or increased by
the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the
court, then, for the purposes of this section, the duty or interest as reduced
or increased, as the case may be, shall be taken into account :
Provided also that in
case where the duty or interest determined to be payable is increased by the
Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the
court, then, the benefit of reduced penalty under the first proviso shall be
available if the amount of the duty or the interest so increased, along with
the interest payable thereon under section 28AB, and twenty-five per cent of
the consequential increase in penalty have also been paid within thirty days of
the communication of the order by which such increase in the duty or interest
takes effect :
Provided also that
where any penalty has been levied under this section, no penalty shall be
levied under section 112 or section 114.
Explanation. - For
the removal of doubts, it is hereby declared that - 10 (i) the provisions of
this section shall also apply to cases in which the order determining the duty
or interest under sub- section (2) of section 28 relates to notices issued
prior to the date on which the Finance Act, 2000 receives the assent of the
(ii) any amount paid
to the credit of the Central Government prior to the date of communication of
the order referred to in the first proviso or the fourth proviso shall be
adjusted against the total amount due from such person."
relevant proviso in Section 114A is applicable only where duty has been paid.
In the instant case the claim that Rs.25 lakhs which is not whole of the
differential duty is claimed to have been paid before the issuance of the show
cause notice. The same is not a mitigating circumstance.
being the position, the appeal filed by the company is without merit and is
dismissed. So far as appeal filed by Ravi Karumbaiah is concerned it is to be
seen that the provision of penalty is not mandatory in the sense since
discretion is given. CESTAT has not dealt with the question whether the quantum
of penalty levied under Section 114A is reasonable and fair. It appears that
Ravi Karumbaiah was the Managing Director and Chief Promoter of the appellant
company while Thomas Mathew who was the director of the appellant company was
also a Director of Proma SRL.
Even though there is
no elaborate discussion regarding the quantum of penalty yet considering the
background facts it cannot be said that the quantum of penalty imposed suffers
from any infirmity. Appeal filed by Ravi Karumbaiah is also dismissed.
Accordingly both the appeals are dismissed with no order as to costs.
(Dr. ARIJIT PASAYAT)